Depending on jurisdiction, the term "company" may or may not be synonymous withcorporation,partnership, firm andsociety. Companies are governed bycompany law, which is also known as corporate law in some jurisdictions. Incorporated companies are created by and registered with thestate,[1] whereasunincorporated companies are not.
When a company closes, it may need to beliquidated to avoid further legal obligations. Companies may associate and collectively register themselves as new companies known ascorporate groups, collections of parent and subsidiary corporations.
the Corporation itself is onelyin abstracto, and resteth onely in intendment and consideration of theLaw; for a Corporation aggregate of many isinvisible,immortal, & resteth only in intendment and consideration of the Law; and therefore it cannot have predecessor nor successor. They may not committreason, nor be outlawed, norexcommunicate, for they have nosouls, neither can they appear in person, but byAttorney. A Corporation aggregate of many cannot dofealty, for an invisible body cannot be in person, nor can swear, it is not subject to imbecilities, or death of the natural,body, and divers other cases.
In 1776,Adam Smith wrote in theWealth of Nations that mass corporate activity could not match private entrepreneurship, because people in charge of "other people's money" would not exercise as much care as they would with their own.[3]
At the end of the 19th century in the United States, the law allowed for the concentration of wealth and power in the hands of a few people, or a single person. In response, theSherman Antitrust Act of 1890 was created to break up big business conglomerates, and theClayton Act of 1914 gave the government power to haltmergers and acquisitions that could damage the public interest. By the end of theFirst World War, it was increasingly perceived that ordinary people had little voice compared to the "financial oligarchy" of bankers and industrial magnates.[5] In particular, employees lacked voice compared to shareholders, but plans for a post-war "industrial democracy" (giving employees votes for investing their labor) did not become widespread.[6]
TheWall Street crash of 1929 saw the total collapse of stock market values, as shareholders realized that corporations had become overpriced. They sold sharesen masse, meaning many companies found it hard to get finance. The result was that thousands of businesses were forced to close, and they laid off workers. Because workers had less money to spend, businesses received less income, leading to more closures and lay-offs. This downward spiral began theGreat Depression.[7] This led directly to theNew Deal reforms of theSecurities Act of 1933 andSecurities and Exchange Act of 1934. A newSecurities and Exchange Commission was empowered to require corporations disclose all material information about their business to the investing public.[8]
AfterWorld War II, a general consensus emerged that directors were not bound purely to pursue "shareholder value" but could exercise their discretion for the good of all stakeholders, for instance by increasing wages instead of dividends, or providing services for the good of the community instead of only pursuing profits, if it was in the interests of the enterprise as a whole.[9] However, different states had different corporate laws. To increase revenue fromcorporate tax, individual states had an incentive to lower their standards in a "race to the bottom" to attract corporations to set up their headquarters in the state, particularly where directors controlled the decision to incorporate. "Charter competition", by the 1960s, had led Delaware to become home to the majority of the largest US corporations. This meant that the case law of theDelaware Chancery andSupreme Court became increasingly influential.
During the 1980s, a huge takeover and merger boom decreased directors' accountability. To fend off a takeover, courts allowed boards to institute "poison pills" or "shareholder rights plans", which allowed directors to veto any bid – and probably get a payout for letting a takeover happen. More and more people's retirement savings were being invested into the stock market, throughpension funds,life insurance andmutual funds. This resulted in a vast growth in theasset management industry, which tended to take control of voting rights. Both the financial sector's share of income, and executive pay for chief executive officers began to rise far beyond real wages for the rest of the workforce. TheEnron scandal of 2001 led to some reforms in theSarbanes-Oxley Act (on separating auditors from consultancy work). The2008 financial crisis led to minor changes in theDodd-Frank Act (on soft regulation of pay, alongsidederivative markets). However, the basic shape of corporate law in the United States has remained the same since the 1980s.
A company can be defined as an "artificial person", invisible, intangible, created by or under law,[10] with a discretelegal capacity (or "personality"),perpetual succession, and acommon seal. Except for some senior positions, companies remain unaffected by the death, insanity, orinsolvency of an individual member.
The English word, "company", has its origins in theOld French termcompagnie (first recorded in 1150), meaning "society, friendship, intimacy; body of soldiers",[11] which came from theLate Latin wordcompanio ("one who eats bread with you"), first attested in theSalic law (c. AD 500) as acalque of theGermanic expressiongahlaibo (literally, "with bread"), related toOld High Germangaleipo ("companion") and toGothicgahlaiba ("messmate").
By 1303, the word company referred totrade guilds.[12] The usage of the termcompany to mean "business association" was first recorded in 1553,[13] and the abbreviation "co." dates from 1769.[14][15]
InEnglish law, a company is a body corporate or corporation company registered under theCompanies Acts or under similar legislation.[16]
A limited company is a "company in which the liability of each shareholder is limited to the amount individually invested".[17] An unlimited company is a company with no limit on the liability of its members.[18]
Private and public companies
A public company is a company whoseshares may be traded publicly.[19]
^The Massachusetts governorCalvin Coolidge passed "An Act to enable manufacturing corporations to provide for the representation of their employees on the board of directors" (April 3, 1919) Chap. 0070. This was a measure that allowed corporations to voluntarily give workers votes. It remains in the Massachusetts Laws, General Laws, Part I Administration of the Government, Title XII Corporations, ch 156 Business Corporations, §23
^Compare a definition of a corporation:"Perhaps the best definition of a corporation was given by Chief Justice John Marshall in a famous Supreme Court decision in 1819. A corporation, he said, 'is an artificial person, invisible, intangible, and existing only in contemplation of the law.' In other words, acorporation [...] is an artificial person, created by law, with most of the legal rights of a real person."Pride, William M.; Hughes, Robert J.; Kapoor, Jack R. (1985). "4: Choosing a form of business ownership".Business. CengageNOW Series (10 ed.). Mason, Ohio: Cengage Learning (published 2009). p. 116.ISBN9780324829556. RetrievedApril 20, 2019.
^Compare:Harper, Douglas."company".Online Etymology Dictionary. - 'From late 14c. as "a number of persons united to perform or carry out anything jointly," which developed a commercial sense of "business association" by 1550s, the word having been used in reference to trade guilds from late 14c.'
^Compare:Harper, Douglas."co".Online Etymology Dictionary. - 'by 1670's as an abbreviation of company in the business sense, indicating the partners in the firm whose names do not appear in its name. Hence and co. to indicate "the rest" of any group (1757)'.
"Labor and Employment".Government Information Library. University of Colorado at Boulder. Archived fromthe original on June 12, 2009. RetrievedAugust 5, 2009.
